Indices have been used by investors as market indicators and for constructing investment portfolios, funds, or other products and services linked to one or more indices. Conventional security indices do not evaluate a company's intangible assets and may overemphasize the importance of tangible assets. As the economy has transformed from a manufacturing base manned by laborers to a service base driven by knowledge workers, intellectual capital has emerged as a leading asset class among industrialized countries worldwide.
The term intellectual capital refers generally to the value of a company's intangible assets including such assets as intellectual property, sales & marketing information, assembled work force/management, leasehold rights, and other assets without tangible, physical substance. “Intellectual property assets,” as used herein includes patents, trademarks, copyrights and trade secrets, as well as research and development, inventions, discoveries, improvements, modifications, enhancements, technologies, methods and production/process information know-how, expertise, algorithms, compositions, data, works, concepts, designs, ideas, prototypes, writings, notes, licenses and patent applications.
Calculating the value of all intangibles, both internally developed and acquired, by subtracting tangible book value from the market value of the companies within the S&P 500.RTM. index, intangible value as a percentage of market value has grown from 16.8% in 1975, to 79.7% in 2005. In 1975, intangible value made up 73% of the value of the health care sector and 63% of the value of the information technology sector, but less than 15% of the value in almost all other sectors. By 2005, most sectors attribute more than three-quarters of their market value to intangibles.
Traditional measurements used by investors fail to fully capture the extent of the transformation to the predominance of intangible assets over tangible assets. A more purposeful focus on intangibles may benefit investors much more than an analysis of tangible assets, especially since the growth in the value of a stock is more dependent upon the growth of its intangible value rather than its tangible value.
What is needed, therefore, is a method and system for generating intangible asset indices that focus on the value and/or quality of intangible assets, and likewise, investment products based on such intangible asset indices and services relating to their construction.